The true extent of PSU banks' woes

​Role of the banking sector

This Adam Smith quote sums up the role of the banking sector in the economy. "It is not by augmenting the capital of the country, but by rendering a greater part of that capital active and productive than would otherwise be so, that the most judicious operations of banking can increase the industry of the country."

Contrast this with a recent comment by the beleaguered United Bank of India's executive director, Sanjay Arya to a newspaper. "The bank's exposure to state-sponsored schemes has increased from Rs 500 crore to Rs 1,500 crore. And recovery from these sectors is a challenge because of political interference."

The difference between the two tells us the plight of a public sector banker. Using public sector banks (PSU) to promote government's agenda can be considered ok, but then the government should be able to recapitalise them as well.